I've become very interested in bridge loans.

[Matthew Paetz]

I'm interested in learning as much as possible about the details of bridge loans. I'd like to offer this type of loan in the near future, but I want to know as much as possible. Does anyone have extensive knowledge?

[Darryl Dahlen]

While I wouldn't call my knowledge of bridge loans extensive, I'll happily tell you what I know as this a great topic. Not to mention, there are a lot of people who have a misconception of what a bridge loan is that could use some clarity.

For those who don't know, a bridge loan is interim financing, that most often, bridges the gap of an immediate need for money while the borrower waits for either the sale of a property or more permanent financing to step in.

Where borrowers most often fail to understand how bridge financing works is in situations where they have a need for money, but do not have the exit strategy lined up yet. In these cases, this is more of what I like to call a bridge to nowhere, and 99 times out of 100, there is zero hope of securing a bridge loan.

This is in large part due to there is usually a pressing need for the loan. A big advantage of bridge lenders is their capacity to close quickly, and by quickly, I mean 5-20 days. In order for that to happen the lender needs to drastically reduce the traditional underwriting/DD process.

This can only happen if the bridge lender is supremely comfortable with the strength of the purchase contract, commitment from the takeout lender, etc. Of course, traditional underwriting requirements such as property type, LTV, income,loan amount, etc. also play a role in the decision making process.

While a bridge lender typically also requires docs that are the same as used by more conventional lenders, they are often times more willing to use documents that have either been ordered by the takeout lender or buyer or were prepared for them. An appraisal is a prime example of this.

As far as terms go,I don't see bridge lenders offering terms all that different from hard money lender. If anything, bridge lenders are more likely to enforce a PPP than a hard money lender, but like anything in lending, there are exceptions to the rule.